In this chapter, we will discuss the Forex scalping tactic – a trading strategy for beginner traders. Why did we classify it as a strategy for novices? Because it is very simple to apply, and any beginner trader with experience working in the MetaTrader 4 terminal on a demo account can master it. Later, we will examine one very profitable strategy based on scalping in detail, but first, let’s talk a bit about the concept of pip hunting.
Market: Forex; Trading indicators: Scalper_MA, Channel; Timeframe: M1, M30; Strategy: scalping, pip hunting; Protective orders: StopLoss, TakeProfit.
Scalping (pip hunting) is a strategy based on the principle of quickly opening and closing positions on 1-5 minute charts to capture profits that cover the spread size. In other words, as soon as the profit on an open position becomes positive and satisfies the trader, the order is closed. Based on this definition, traders coined an alternative name for scalping – pip hunting (to pip hunt, catch pips). If you encounter the term pip hunting, know that it refers to scalping.
The characteristic feature of scalping is, first and foremost, the large number of trades executed. In one day, a trader may conduct from 30 to 1000 trades. In most cases, pip hunting uses M1 (1 minute) and M5 (5 minutes) charts. For successful scalping, a scalper needs high leverage. The vast majority of scalpers use leverage of 1:200 to 1:500. For example, with 1:500 leverage, you can open a 1 lot position with just $200 margin. Later, we will discuss each rule underlying scalping in detail.
Among professional traders, scalping is not popular, as many associate pip hunting with senseless risk and lack of a clear entry and exit strategy. This statement is partially true, but not entirely (more on that later). Today, there are numerous scalping-based strategies for various currency pairs and timeframes. However, as mentioned earlier, the core principle of the strategy is just one: “Take profit in time.”
To help you better understand the main principles of the scalping strategy, let’s outline its key advantages and disadvantages.
Advantages of scalping (pip hunting) on Forex:
- With successful trades, good daily profit of 10-30% (depending on risk level) of the deposit size.
- No need to study technical or fundamental analysis. Scalping trading requires only rules for opening and closing positions. We will cover the main scalping rules later.
- Free market entry. No need to wait for a trend, as you can trade anytime, in any trend type.
Disadvantages of scalping (pip hunting) on Forex:
- High nervous tension when trading on a live account. Prepare to stock up on sedatives. You never know what the trend has in store for you.
- With high leverage, random pip hunting can wipe out your deposit if the trend reverses sharply.
- Lack of free time with manual scalping. During manual trading, you will constantly monitor open positions, whether you like it or not. You might step away for tea for a couple of minutes, but it’s rare. Due to nervous tension, you won’t be able to tear yourself away from the terminal, especially when profit turns positive.
- To exceed breakeven, the price must move by the spread size. Initially, every trade is in the red by the spread amount.
- Some Forex brokers charge commissions on open trades instead of spreads. In such cases, scalping trades must cover these commissions.
- High risk for low profit. Risking your entire capital per trade yields just $1-2. With many profitable trades, you can achieve 10-30% daily profit (depending on deposit and volume). But as noted, any small move can destroy your deposit in seconds.
- Many brokers inflate TakeProfit and StopLoss values. Most won’t let you set stops closer than 5 pips from price. With manual trading, you lack time to set stops. This point matters mainly for mechanical scalping systems.
Before summarizing whether scalping is worth using on a live account, let’s list the core rules of scalping.
- Profit must cover the spread. With a 2-pip spread, close the order at 3-5 pips profit.
- Most scalpers target 5 pips.
- Use minute charts (M1). The 1-minute chart best suits scalping, as it shows price fluctuations fastest.
- Use maximum leverage. With a small deposit, high leverage expands opportunities. For 1:500 leverage, $20 suffices for a 0.1 lot position.
With a proper strategy, scalping becomes a highly profitable trading system. Next, we present an example of a profitable trading system based on scalping rules.
Profitable Scalping-Based Strategy
This trading system is relatively new compared to analogs. It uses two indicators combined with classic scalping rules.
First, install two scalping indicators: Scalper_MA and Channel. Copy the downloaded indicators to the \experts\indicators folder in MetaTrader 4. Then launch (or restart) the MetaTrader 4 terminal. Trade on the GBPUSD pair (any currency pair works). Timeframe: M1 for Scalper_MA and M30 for Channel, as recommended.
Opening Trades in the Scalping Strategy
The M1 chart with Scalper_MA indicator forms the strategy’s basis. It signals trade entries.
– Up arrow – open a buy position.
– Down arrow – open a sell position.
Open the order only after the price moves more than 2 pips in the signal direction. Also, wait for 7 red or blue bars from below.
For a Scalper_MA buy signal on M1, wait for the price to rise over 2 pips and 7 bars to pass. Then open a buy order if conditions hold. Also, check Channel indicator signals on M30. It filters noise. Open orders only when both indicators align. For a Scalper_MA buy on M1, switch to M30; open only if Channel tunnel points up. If down or horizontal, avoid opening.
Exiting the Scalping Strategy
Close orders at desired profit. Aim for 1-3 pips per trade (for 0.1 lot, 1 pip = $1; for 1 lot, 1 pip = $10). If using stop orders, set as follows:
For 5-digit brokers: TakeProfit = 30, StopLoss = 100. For 4-digit brokers: TakeProfit = 3, StopLoss = 10. Optimize as needed.
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“excerpt”: “Learn Forex scalping (pip hunting) strategy for beginners using Scalper_MA and Channel indicators on M1/M30 timeframes.”,
“short_description”: “Comprehensive guide to Forex scalping strategy for beginners, including rules, pros/con
